Many clients have asked me how to insure that a bank account or investment account passes to a particular person (spouse or child) without having to wait until a Will is probated. First, I would like to remind you that the amount of time its takes to probate an estate in Texas depends to a great extent on the type of estate and the complexity of the estate. In most instances this is a relatively short amount of time.
Another factor to consider, that is often overlooked, is protection of your assets. When you add another person to your accounts it opens you up to liability. While it is unlikely the child or person you add to your account would take your funds without permission, it is a possibility. But the danger I am talking about is accidental loss. If the person you add to your accounts is ever in a lawsuit or audited, then the attorney on the other side is not going to care it was Mom or Dad’s money. They just see another source of money for their lawsuit. Texas provides access to accounts through a statutory durable power of attorney that gives the person(s) you want to have access, but no ownership. Thus protecting your asset.
However, if it is your intent that a particular account with a financial institution pass to a named survivor immediately upon your death, this can be achieved if the account is set up properly. As is too often the case, the devil is in the details. The language sufficient to create survivorship rights is the key. You do not want your loved one(s) to end up in a legal battle with the financial institution over whether this is the case.
There is a provision in the Texas Estates Code § 113.151, to assist in this regard. Until this provision was enacted, there was no uniform type of signature card or account agreement governing bank or financial accounts. The language varied from institution to institution. In many instances, the agreement was expressed in Uniform Commercial Code legalese, conveying the distinct impression that the primary objective was not to give the customer meaningful information as to the rules governing the account, but rather to protect the bank or financial institution in every conceivable situation.
Estates Code § 113.151 reflects an admirable effort to give the consumer clear and understandable information as to the different types of accounts that are available and the legal consequences attached to them. However, many banks and financial institutions in Texas still do not use the Uniform Account Form (i.e., statutory safe harbor language) provided in Estates Code § 113.151. It is unlikely any of the national investment accounts use this language.
The importance of the language used on the bank or financial institution’s signature card being sufficient to create survivorship rights was highlighted by two recent appellate cases. Armstrong v. Roberts, 211 S.W.3d 867 (Tex.App-El Paso 2006, pet. denied) and In re Estate of Wilson, 213 S.W.3d 491 (Tex.App-Tyler 2006, no pet.h.). In the Armstrong case the bank had signature cards that stated “Ownership: Joint w suv.” The issue before the trial and appellate courts was whether this language was sufficient to create survivorship rights. The court indicated that this language, standing alone, was insufficient. However, the front of the card made express reference to the back of the card which did contain language substantially similar to Estates Code § 113.151. In the Wilson case, both the trial and appellate courts agreed that signature cards marked with an “X” next to the designation “Joint with Right of Survivorship” and which referred to a deposit agreement stating that “when a co-owner dies, the balance of the account belongs to the surviving co-owner(s)” was sufficient to create survivorship rights.
To avoid problems, financial institutions should follow the statutory safe harbor language when creating multiparty accounts and give serious consideration to using the statutory form in Estates Code § 113.151.
Another factor to consider is will there be items such as real estate, vehicles and funeral expenses that must be paid as part of your estate. If settling your estate will require dealing with these matters, then naming a person as a pay on death beneficiary may leave the executor without the funds to cover these matters. Additionally, if you have a concern that your beneficiary may need assistance with managing funds you leave them, then naming them as a pay on death beneficiary does not allow the executor the ability to help manage the funds.
When working on your estate plan, your attorney and financial planner should work together to make sure potential problems are avoided. It is not sufficient that your bank or financial institution have you sign a signature card stating joint account with right of survivorship. Your estate planning attorney should review the card or document to make sure it complies with safe harbor language of Estates Code § 113.151. This is particularly important if your bank or financial institution is a national firm.